Cassidy Horton is a finance writer covering banking, life insurance and business loans. She has worked with top finance brands including NerdWallet, MarketWatch and Consumer Affairs. Cassidy first became interested in personal finance after paying of.
Cassidy Horton Personal Finance Reviewer and WriterCassidy Horton is a finance writer covering banking, life insurance and business loans. She has worked with top finance brands including NerdWallet, MarketWatch and Consumer Affairs. Cassidy first became interested in personal finance after paying of.
Written By Cassidy Horton Personal Finance Reviewer and WriterCassidy Horton is a finance writer covering banking, life insurance and business loans. She has worked with top finance brands including NerdWallet, MarketWatch and Consumer Affairs. Cassidy first became interested in personal finance after paying of.
Cassidy Horton Personal Finance Reviewer and WriterCassidy Horton is a finance writer covering banking, life insurance and business loans. She has worked with top finance brands including NerdWallet, MarketWatch and Consumer Affairs. Cassidy first became interested in personal finance after paying of.
Personal Finance Reviewer and Writer Michelle Megna Lead Editor, InsuranceMichelle is a lead editor at Forbes Advisor. She has been a journalist for over 35 years, writing about insurance for consumers for the last decade. Prior to covering insurance, Michelle was a lifestyle reporter at the New York Daily News, a magazine.
Michelle Megna Lead Editor, InsuranceMichelle is a lead editor at Forbes Advisor. She has been a journalist for over 35 years, writing about insurance for consumers for the last decade. Prior to covering insurance, Michelle was a lifestyle reporter at the New York Daily News, a magazine.
Michelle Megna Lead Editor, InsuranceMichelle is a lead editor at Forbes Advisor. She has been a journalist for over 35 years, writing about insurance for consumers for the last decade. Prior to covering insurance, Michelle was a lifestyle reporter at the New York Daily News, a magazine.
Michelle Megna Lead Editor, InsuranceMichelle is a lead editor at Forbes Advisor. She has been a journalist for over 35 years, writing about insurance for consumers for the last decade. Prior to covering insurance, Michelle was a lifestyle reporter at the New York Daily News, a magazine.
| Lead Editor, Insurance
Updated: Feb 12, 2024, 9:20am
Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.
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Signing a car lease may seem like a great deal because you get to drive a new car for less money than buying one. But there’s an extra cost you need to budget for—leased car insurance.
Leasing companies require more auto insurance coverage than state mandated minimum coverage you need to drive legally. And while this helps protect the leasing company, it also raises your premiums.
Before committing to a lease, learn what’s required, how much extra you may pay when car leasing with insurance and ways to score discounts. That way you have the information you need to decide if a leased vehicle is the right path for you.
You’re required to have car insurance coverage on your leased vehicle at all times. Both your state and leasing company will have minimum coverage requirements you must meet.
Since the leasing company technically owns your car, you’re also required to list them as the “additional insured” and “loss payee” on your insurance policy, so any paid out claims will go to them.
Whether you own, lease or finance your vehicle, nearly all states require drivers to carry a minimum level of car insurance. While specific requirements vary across states, there are several standard coverages you may need to meet the legal minimum required car insurance in your state.
Check state laws for minimum liability, UM/UIM and PIP requirements. Choosing higher limits than your state’s minimums may be wise, depending on your financial situation.
In addition to state minimums, your leasing company may have other car insurance coverage minimums you need to meet. For example, you might be required to have at least $100,000 in per-person bodily injury liability limits, $300,000 per accident and $50,000 in property damage liability coverage, even if your state requirement is lower.
Most leasing companies will require you to purchase these types of physical damage coverage:
$100,000/$300,000 bodily injury liability limits, $50,000 property damage liability, collision and comprehensive coverage with a maximum $1,000 deductible.
Varies by policy. Same minimum as your state, plus collision and comprehensive with a maximum $1,000 deductible. Mercedes-Benz$100,000/$300,000 bodily injury liability limits, $50,000 property damage liability, collision and comprehensive coverage with a maximum $2,500 deductible.
$100,000/$300,000 bodily injury liability limits, $50,000 property damage liability, collision and comprehensive coverage with a maximum $1,000 deductible.
Same minimum as your state, plus collision and comprehensive coverage with a maximum $1,000 deductible.
See More See LessSome dealerships automatically include gap insurance in your monthly lease payment, so you may be paying for it without even realizing it. Others will mandate you purchase a separate gap policy.
Gap coverage pays the difference between what your auto insurance pays if your leased car is totaled and what you still owe on the lease.
For example, if you have $20,000 left on your lease but your insurer only pays the actual cash value of $15,000 for your totaled $40,000 car, gap coverage will pay the $5,000 difference. This protects you from owing thousands to the leasing company for a car you no longer have.
Gap insurance is often worth getting on a leased vehicle since cars depreciate quickly. Review your lease carefully to see if gap coverage is included or required. If not, consider adding it to fully protect yourself in case of a total loss accident while leasing.
Insuring a leased car can be more expensive than insuring an owned vehicle because of the liability, comprehensive and collision coverage requirements imposed by most leasing companies. Often, these requirements exceed state minimums.
For example, the average annual cost of car insurance for full coverage—or a policy with liability, comprehensive and collision insurance—is around $2,150, based on Forbes Advisor’s analysis. State minimum insurance is 79% cheaper at $467 per year, on average. But state minimum coverage doesn’t include comprehensive and collision, and usually has lower liability limits than what’s required by care lease contracts.
Also, leasing companies often restrict deductible amounts to no more than $1,000 for comprehensive and collision, which can also increase rates. So while leasing doesn’t directly increase the average annual cost for full coverage car insurance, the extra coverage requirements can add several hundred dollars or more per year versus insuring an owned vehicle.
It’s important to note that if you financed a car, your lender would probably require you to buy full coverage car insurance. That means the cost of insurance could be close to what you would pay for a leased car with full coverage requirements.
While leased car insurance can be more expensive than insurance for a car you own, there are ways to lower your premiums:
With so many choices for car insurance companies, it can be hard to know where to start to find the right car insurance. We've evaluated insurers to find the best car insurance companies, so you don't have to.
Leased car insurance and car subscription insurance requirements are generally the same. Both need to meet state minimum liability coverage and will require collision and comprehensive coverage per the leasing or subscription company’s policy. Note that leased car insurance differs from subscription insurance in how it’s administered. You buy insurance for your leased car, whereas car subscription services typically supply you with insurance.
Leased car insurance often meets the requirements for full coverage insurance, including liability, collision and comprehensive. But these policies may have higher liability limits and lower deductibles than a basic full coverage policy. Still, you can save money by comparing car insurance quotes from multiple insurers to find cheapest full coverage car insurance.
No, car insurance is not included in a standard auto lease agreement, although some companies may roll the price of gap coverage into your monthly payment. You’re responsible for obtaining liability, collision and comprehensive coverage to meet your state and leasing company’s minimum requirements. Review your lease carefully and shop for quotes before signing to ensure you can afford both the monthly lease payment and insurance premiums.
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Personal Finance Reviewer and WriterCassidy Horton is a finance writer covering banking, life insurance and business loans. She has worked with top finance brands including NerdWallet, MarketWatch and Consumer Affairs. Cassidy first became interested in personal finance after paying off $18,000 in debt within 10 months of graduating college. She later went on to triple her salary in two years by ditching her 8-to-5 job to write for a living.
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